100% completion guarantee as a commercial asset

Why would a certified contractor establish a 100% guarantee if the law only imposes a 5% guarantee? Not only does it give the buyer more security and confidence, the contractor does not have to wait for final acceptance to release the guarantee.

To better protect buyers of houses or apartments against the insolvency of the contractor or seller, the Breyne Act introduced a guarantee scheme in Belgium. A distinction is made between certified and non-certified contractors.

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5% versus 100% guarantee

Certified contractors are obliged to set a bond corresponding to 5% of the price of the building. This guarantee has to be put in place with the Deposit and Consignment Office. Half is released upon provisional acceptance, the other half upon final acceptance of the building. In the event of a delay or partial non-execution of the works due to the contractor, the buyer may deduct the sum of money for the loss he suffered from this guarantee.

If, however, the approved contractor goes bankrupt, the buyer has no certainty that the building will actually be completed.

Non-certified contractors, including project developers, engineering firms and project managers, are covered by a different guarantee scheme. They must provide either a completion guarantee or a repayment guarantee for the advances. Either they guarantee the completion of the building or they repay the amounts paid. This guarantee covers not 5%, but 100%.

The buyer can therefore rest assured. If something goes wrong, a specialized insurer or a bank will provide the necessary financing to ensure the construction of the building. The release of this guarantee takes place entirely at the time of provisional acceptance.

Better protection

In practice, more and more certified contractors opt for a 100% completion guarantee. The advantage for them is that this guarantee is released on provisional acceptance. They therefore do not have to wait for a final release document signed by the buyer. This often takes a long time and sometimes it is even never signed.

If the contractor opts for a lump premium, this also simplifies the administration and provides full price transparency for the project.

But above all, such a 100% guarantee is an additional commercial asset that contractors can offer to their buyers. The buyer can count on his home being finished, even if something goes wrong with the seller. So he is better protected.

Specialist insurer

Euler Hermes is a specialist in the field of surety and guarantees for contractors and construction promoters. Within the framework of the Belgian Breyne law, Euler Hermes offers the 100% completion or refund guarantee. A similar guarantee is also offered for projects developed on the Luxembourg market.

Do you have questions or would you like to know more about all our guarantees and warrants? We are at your service.

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